Monitor displays banding, external monitor displays good image

Your symptoms point to a bad display assembly. The easiest way to fix this is just replace the full assembly. Its possible the T-Con board on the back of the display is bad and not the complete display you might be able to replace it alone. See if you can find the same display assembly which has a bad LCD which you can steal the T-Con board (don’t spend too much). If you’re lucky that might fit things.

In any case make sure you use the correct tools and methods in removing the display assembly as many people damage it in the process of taking it off. Follow this guide: iMac Intel 27" EMC 2546 Display Replacement You’ll want this kit : [linked product missing or disabled: IF174-005] As well as these: Plastic Cards & iFixit Opening Picks (Set of 6) if you have the needed screw drivers. If not you might as well get this tool kit: Pro Tech Toolkit plus the plastic cards.